The goal of this study is to understand the relationship between functional status and healthcare utilization and cost. The specific aim is to determine the relationship between functional status and the use and cost of acute and chronic care services among Medicare beneficiaries. The study will examine baseline functional status, transitions in functional status, and potential confounders of functional status, such as age, gender, health status, and cognitive status. Projections that the Medicare Program will become bankrupt early in the next decade have led to efforts to identify the determinants of Medicare utilization in order to identify potential areas for cost savings, to evaluate the impact of managed Medicare, and to determine whether money is being spent appropriately. Because functional status is an excellent summary measure of an older person's health status, it is especially important to determine its relationship to healthcare utilization. Existing studies have reached conflicting conclusions about the relationship of functional status to the use of hospital services, and are limited to an examination of Medicare- reimbursed services. This study will examine the utilization and cost of Medicare services and non-Medicare-reimbursed institutional long-term care among two cohorts, the Yale Health and Aging Project and Project Safety, two probability samples of initially community-dwelling older persons. The study will use logistic regression to model utilization and ordinary least squares to model cost among utilizers of a service in a given year. Functional status at the beginning of the year will be the initial predictor. Then, to evaluate the effect of functional decline both prior to and during that year, functional status transitions will be added to the models. In order to evaluate potential confounders, demographics, health status, cognitive status, medication use, social support, and permanent nursing home placements will be added to the models. By identifying those with high utilization of services, the results of this study will identify potential areas for intervention.